Minimum Premium Health Plans: Insured Non-Insurance: Comment

Abstract

Dr. Eilers has done a service in his article, Minimum Premium Health Plans: Insured Non-Insurance, 1 in exposing the problem. I disagree, however, with some of his conclusions. Under the Mini-Met plan, the cash flow and the financial position of both the insurer and the employer are the same or substantially the same as under a conventional group insurance arrangement. Furthermore, the risk undertaken both by the employer and by the insurer is the same under both the Mini-Met arrangement and the conventional group insurance plan. Under these circumstances, it is difficult to understand how one can be considered insurance and hence subject to premium tax, and the other non-insurance and free of premium tax. I think it may be helpful in seeing through what is essentially a very complex problem if I can describe the conventional group insurance arrangement for a large employer through the use of a theoretical model. Obviously the figures will be illustrative only, but they are nevertheless reasonably indicative of normal results. In a typical large case, the monthly premium is due and payable on the effective date of the plan. It is normally paid shortly after the end of the thirty-one day grace period. In the meantime the insurer pays claims as presented. There is, however, a lag in the presentation of claimis